Smoky Mountain Center has begun the process of transferring its mental health services to private companies in a move that signals the advent of the latest overhaul to the state’s mental health provider network.

Last week, Smoky Mountain Center closed its request for proposals to assume responsibility for the Adult Recovery Unit at Balsam Center, the psychiatric walk-in and outpatient services at Haywood Regional Medical Center, and mobile crisis services in the seven counties of Western North Carolina.

Two local mental health providers — Meridian Behavioral Health and Appalachian Community Services — submitted bids to take over the services, which are supported by approximately $4.5 million of state funding each year. Smoky Mountain Center will award the services to one of the two applicants on March 26.

The transfer of the bundle of psychiatric services generally called Smoky Operated Services will bring the center back in line with the state’s guidelines for local management entities like Smoky Mountain Center that act as payers in the Medicaid system. Under its 2003 reform of mental health care, the North Carolina Department of Health and Human Services asked regional management entities like Smoky Mountain Center to stop providing services in order to create a clear split between service providers and Medicaid payers.

However, the absence of providers for critical psychological services in Western North Carolina led the state to exempt Smoky Mountain Center.

By ridding itself of its remaining services, Smoky Mountain Center can focus on its primary job.

“Our sole responsibility is as a system manager and payer, and this makes the relationship a lot cleaner,” said Smoky Mountain Center CEO Brian Ingraham.

The transfer, though, is just as much a part of the state’s newest reform effort as its last one. The push to privatize mental healthcare had the unintended side effect of factionalizing the provider network. So the state launched a second reform to consolidate service providers.

As part of a new initiative to consolidate its network of mental health providers, the state announced the Critical Access to Behavioral Health Agency program last year.

CABHA is designed to create a new set of standards and requirements by July 1 of this year for behavioral health providers that use state and federal mental health funding. The range of services from providers include substance abuse counseling, crisis intervention, psychological assessments, and treatment for mental health issues like depression.

Under the new rules, mental health service providers must have a full-time psychiatrist on staff, national accreditation, and take on additional administrative duties in order to bill through Medicaid. So far about 40 mental health providers around the state have begun the CABHA application process.

Ingraham said CABHA created a new impetus for Smoky Mountain Center to divest its services, because the local providers had to hire full-time psychiatrists anyway.

“Had it not been for CABHA, this would have been a tough sell,” Ingraham said. “It would have been difficult to attract people to these services. So we’re really trying to use the timing to our advantage.”

Ingraham said his driving aim has been to negotiate the transfer of services without hurting the people who rely on them.

“This is really organized around minimizing disruption. There’s not going to be any loss of service or care,” Ingraham said. “We want this to be seamless.”

For the providers bidding on the services, the transfer offers an opportunity to consolidate a market share in a shifting landscape. Both Meridian Behavioral Health and Appalachian Community Services have begun the process of applying for CABHA status, and both now have full-time psychiatrists on staff.

Meridian currently provides crisis and counseling services to people with addiction and mental health issues, primarily in Haywood County. The company’s CEO, Joe Ferrara, said assuming the Smoky Operated Services will allow Meridian to offer a fully-integrated system of care that meets the intent of the CABHA program.

“It fits very nicely with the state’s vision of the CABHA. What the state is interested in is creating comprehensive provider organizations rather than an array of individual agencies,” Ferrara said.

Ferrara said the short timetable for obtaining CABHA status and the assumption of new services would be a challenge for whoever gets the contract.

“Whoever receives the award is going to have to get on the fast track,” Ferrara said.

Appalachian Community Services, which provides a range of behavioral health services to the rural areas in the small WNC counties, will partner with Jackson County Psychological Services — another main player in the region’s mental health landscape — in its bid to take over Smoky Operated Services.

Duncan Sumpter, CEO of Appalachian Community Services, submitted its proposal because they were worried they would see a disruption of services, particularly in far western counties.

“The main reason we wanted to assume the services is that we want to ensure continuity of care for our rural customers,” Sumpter said.

Both Sumpter and Ferrara said winning the award would guarantee their institutions access to a client base in the seven western counties, but they did not believe it was a make or break competition.

“I’m pretty confident that we’re both safe in the CABHA game and this is really just a decision about who’s going to provide these services,” Sumpter said.

Both also said they intended to keep the experienced staff currently providing Smoky Operated Services intact.

Ingraham said a committee comprised of Smoky Mountain Center staff and community advisors will evaluate the applications and make recommendations to the board, but that he would make the final decision. Ingraham said the decision will be based on which organization’s plan provides the best access to services across the region, the best mechanism for staffing the services, and the best plan to manage the risks and financial challenges posed by presenting the services.